Food insecurity is worsening after the Russian invasion of Ukraine and the United Nations sustainability goal of zero hunger by 2030 is becoming more difficult to achieve.
ANZ commodity strategist Soni Kumari and agricultural economist Susan Kilsby warn in the bank’s latest Agriculture Insight that the FAO world food index is at a record level, well above its previous peak in 2011.
“Ongoing food inflation will challenge central banks’ ability to rein in overall inflation,” they say.
Lost grain exports from Ukraine and Russia mean that global grain stocks are depleting rapidly except in China, which has been stockpiling.
“The food crisis is triggering food protectionism, which is worsening supply disruptions and pushing soft commodity prices higher.
“Trade restrictions have also been imposed on fertilisers by Russia and China.
“Higher energy and other input prices are further adding to producers’ woes.”
The UN FAO believes that 25 million tonnes of grain are trapped in Ukraine, and this is causing the numbers of undernourished people in Africa to rise quickly.
Wheat inventories have shifted from 50:50 China and the rest of the world five years ago to 60% plus in China right now, where in practice they are not available to other countries.
Russia and Ukraine have in recent years contributed 30%, 17% and 76% respectively of global wheat, corn and sunflower oil exports.
As the war drags on, Ukraine’s ability to sow the next harvest has been disrupted and its agriculture ministry expects plantings to decline 20-30% year-on-year.
Crop yields could suffer even more because of reduced farm management and high fertiliser prices.
Russia’s production will also suffer sanction-related uncertainties.
Sustained La Niña weather patterns have impacted grain production in the United States and Latin America.
The Food Policy Research Institute has reported many instances of countries restricting exports so as to tame food inflation.
China’s exports of fertilisers have fallen from 1m to 2m tonnes a month to about 500,000t/month currently.
The covid-19 impacts on world shipping are not expected to disappear until 2023 and container freight rates have increased by three to four times.
“Food-exporting nations like Australia and New Zealand may continue to benefit in a net sense from high commodity prices, but it’s hard going for lower income earners.”
Also demand will fall as food prices become too expensive.
High food prices contribute to political instability, inducing migration and toppling governments.
“The food crisis is another factor to add to the growing list of potential geopolitical risks and the world tentatively emerges from the shadow of covid-19.”